Contingent Liability

1. The possibility of an obligation to pay certain sums dependent on future events.

2. Defined obligations by a company that must be met, but the probability of payment is minimal.

Investopedia Says:
1. A good example of a contingent liability would be an outstanding lawsuit.

Related Links:
Find out what could be hidden in this often-overlooked part of the financial statements. Footnotes: Start Reading The Fine Print
The footnotes in financial statements hold very important information, but reading them takes skill. How To Read Footnotes - Part 2: Evaluating Accounting Risk

Liability incurred by a business for acts other than those of its own employees. This particular situation may arise when an Independent Contractor is hired. The business can be held liable for negligent acts of the contractor to the extent that its representatives give directions or exercise control over the contractor's employees. See Vicarious Liability.

1. Obligation of a person who signs a promissory note as anAccommodation Endorser, Comaker or Guarantor becoming liable for payment in the event the original borrower defaults.

2. Financial obligation of a bank that is dependent on future events or actions of another party, such as a standing agreement to lend money if a borrower cannot obtain alternate financing. Included are standby letters of credit, commitments to make or purchase loans, and participations in acceptances, financial futures, and forward contracts. These are ordinarily reported as Off-Balance Sheet Liabilities in a bank's Call Report.